Bring back share-in-savings contracting

"The basic idea of share-in-savings is quite simple and straightforward: a contractor is paid, in part or in some instances completely, not through appropriated funds but in the form of a percentage of the cost savings their efforts generate. At the time, I praised this effort as the ultimate form of performance-based contracting and as a polar opposite to a contractor being paid for just showing up."

"There are some existing share-in-savings programs in government. However, implementing this idea often turned out to be hard. First, the savings needed to be quite large to allow any significant amount of funds to be paid to the contactor in lieu of appropriated funds. Relatively few contracts generate savings of such magnitude. Second, it is not straightforward to construct a measure of the savings a contract realizes."

Treasury and the General Services Administration announced a program to financially reward employees whose implemented suggestions produce contract cost savings. Share-in-savings pays contractors, partly or entirely, from a percentage of cost savings rather than appropriated funds. Existing examples include Energy Savings Performance Contracts and a similar Medicare program for providers. Implementation challenges include the need for very large savings to fund payments and the difficulty of constructing reliable measures of contract-generated savings. Political opposition from the Project on Government Oversight criticized share-in-savings as circumventing the appropriations process, contributing to waning interest in procurement reform.

Read at Nextgov.com